Fiat Chrysler to invest $4.5 billion in Michigan for new Jeep SUV models

DETROIT (Reuters) - Fiat Chrysler Automobiles NV said on Tuesday it will invest $4.5 billion in five plants to build new models of Jeeps to compete in the lucrative market for full-size, three-row SUVs currently dominated by rivals General Motors Co and Ford Motor Co.

FILE PHOTO: A Fiat Chrysler Automobiles (FCA) sign is seen at the U.S. headquarters in Auburn Hills, Michigan, U.S. May 25, 2018. REUTERS/Rebecca Cook/File Photo

At the same time, the automaker said it was cutting the third shift at its Rockford, Illinois plant, where it assembles the Jeep Cherokee, laying off 1,371 workers. The company said it would “make every effort” to find work for laid off hourly workers based on seniority.

The new investments announced on Tuesday will create 6,500 jobs in Michigan, Fiat Chrysler (FCA) said in an announcement about three months after GM said it would not allocate new products to five plants in North America that mostly produce less-popular sedan models.

GM workers and politicians, including U.S. President Donald Trump, have blasted GM for the decision, which is likely to close those plants.

The move comes at a time when the U.S. market looks set to decline, with 2019 industry-wide new vehicle sales expected to fall below 2018 levels.

But FCA Chief Executive Officer Mike Manley said in a conference call with reporters that the company’s investments are focused on SUVs, an area “forecasted to continue to grow.”

He added that 60 percent of SUV sales are for three-row models “and we don’t have a three-row offering... and this is a segment that I’ve been very interested in for some time.”

The full-size SUV segment is dominated by GM’s Chevrolet Suburban, GMC Yukon and Cadillac Escalade, which had about double the sales of Ford’s Ford Expedition and Lincoln Navigator in 2018.

FCA’s plans include turning an engine plant in Detroit into an assembly plant. The company also reversed a decision to shift production of heavy-duty trucks from Mexico to Michigan in 2020, freeing the Michigan facility to produce Jeeps.

“I look at today’s investment as a reward for the efforts of our membership and a show of confidence that the members of the UAW are the best auto workers in the world,” United Auto Workers union Vice President Cindy Estrada said in a statement.

The automaker said plans included investments to enable three Michigan plants to produce hybrid and fully electric Jeep models. Manley said those hybrid models or electric models could be available as soon as late 2021, but will be rolled out based on consumer demand.

‘UNLIKE ANYTHING WE HAVE SEEN’

FCA plans to start construction on the new $1.6 billion Detroit facility in the third quarter of 2019 and begin production of a new three-row SUV by the end of 2020, followed by a revamped version of the Grand Cherokee in the first half of 2021.

The plans also include a $900 million investment to modernize and retool another Detroit plant to make the Dodge Durango and Jeep Grand Cherokee.

Those investments come around six years since Detroit filed the largest ever U.S. municipal bankruptcy and will bring nearly 5,000 jobs to the city.

FCA and the city of Detroit have signed a memorandum of understanding that provides 60 days to follow through on the agreed acquisition of land for the new plant.

“This opportunity is unlike anything we have seen in decades,” Detroit mayor Mike Duggan said in a statement, adding that the investments would take place “without displacing a single resident.”

FCA will also start production of its Wagoneer model and the Grand Wagoneer, a new three-row luxury SUV, at a plant in Warren in the first half of 2021. Early last year, FCA said it would move heavy-duty truck production to that plant, but that will now remain in the company’s Saltillo, Mexico, plant.

FCA will invest $1.5 billion in the Warren plant - up from $725 million the automaker had not publicly disclosed.

Additional reporting by David Shepardson in Washington; editing by Jonathan Oatis and Bill Berkrot